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Why is my Car’s Trade-in Valuation so low?



    Why is my trade in worth so little?

It’s pretty common to feel left a bit underwhelmed by a dealer’s offer on your old pride and joy or workhorse and it often puts the brakes on a deal be it for affordability or out of principle.

So it’s a good idea to know why the offers are as they are – and what you can do about it!

For more common cars (read: your Falcons, Commodores and many things mass produced), the typical turnaround from a car yard between acquiring the stock and having it on a new owner’s driveway is typically 3-4 months. Contrary to popular belief however, rare, low-volume cars can either take longer – up to 9-12 months to re-sell; or require the dealer to put an irresistible price tag on the window to have them sell quickly. Despite meaning ‘potential profit’, Niche can mean ‘hard to find a buyer’.

Why is that important? Well. For starters any car through the door typically has to have some degree of remedial or detailing attention. The car also needs to be financed by the dealer, be it through a financier, or their cash reserves. A dealer will also look to generate a certain profit out of each car spot on their shop floor. Say for example, a dealer was looking for $100,000 profit a year and had 20 spaces available; that would mean each space would need to generate $416 in profit a year. That means if the re-sale value for your car is $10,000 and it takes 3 months to sell, the dealer requires $1,200 profit out of it. In those three months, the dealer wants to keep the car running well and looking well. All of these costs can see the dealer’s target value your car in at under $8,000. Adding in a buffer to cover potentially warranty issues and you arrive not too far off half of what you had hoped to sell your car for.

    “But Redbook says..”

At Kars, we don’t put too much faith on any mass generated Valuations. Why? Because such valuations are very out of touch with reality. The Market changes daily whereas valuation publications are updated periodically at best, in isolation of ‘reality’. The fact is, the producers of these publications aren’t likely to be buying cars for the amounts quoted if it was their money, and some even have a vested interest in higher valuations means more certificates sold, lower trade in valuations means; you guessed it, more certificates sold.

    So, what CAN I do?

Three things we’d consider approaching a trade in?

First things First – Forgive me for pointing out the obvious, but it’s often overlooked – especially by people who aren’t planning to buy and get a valuation on a whim; Give your car a clean. Don’t go as far as spending hundreds on a spruce up – but give it a clean, a hover and if you’re able, a polish and wax. As much as appearances mattering much more in a private sale than a trade-in, the key here is presenting the dealer with a great condition car, that they can value safe in the knowledge that they won’t clean it and find a world of dents or swirl marks on the paint. Not only that, but reading point three you’ll see why this goes on to be important in the long run.

Secondly – You would have heard the quote ”the right price is what people are willing to pay for it”. Well, with that in mind, the best way to value your car is to find out what similar examples (read: condition, age, model, engine, spec, kms and depending on the model even things such as the colour / options) are going for elsewhere. This won’t give you an accurate trade-in price, but it certainly gives you an idea of what your market price would be for a private sale.

There is always room for negotiation in a deal, so don’t be afraid to ask the dealer for more. It also isn’t uncommon for dealers to ‘lo-ball’ a prospective buyer, hoping to maximise his profit – nothing dishonest about that per say, they are a business after all, but certainly something to consider.

Thirdly, Consider making any offer with the caveat “I reserve the right to remove my trade-in from the deal in lieu of the equivalent cash sum at any time prior to delivery of the vehicle”. Why? Well, this gives you potentially weeks or more to work on selling your vehicle, all the while still having your trade in offer as a last resort. You might get lucky, sell your car for an extra $3,000 and be able to put it straight into your back pocket! Most dealers are happy to wait for your new car to be available before they collect your old one. Write a well prepped ad, post it around work if you’re happy to do so – after all, people are much less likely to barter with someone they know and trust, even if loosely.

Good luck!

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June 14, 2016